Acme United Well on Its Way for 8th Consecutive Year of Record Performance

2015 was the seventh consecutive year of record performance for Acme United Corp (ACU – $17.29), and that trend has continued in the first quarter of 2016. During the three months period, ended March 31, 2016, Acme posted an 11% increase in revenues and even a 30% rise in net income. Both sales and earnings set a new first quarter record. And more growth is expected.

The new Westcott ceramic box cutters, for example, are hitting the shelves of large retail chains in the US, Canada and Europe. They feature rugged ceramic blades that are much safer than traditional metal cutters. They will start to impact sales as of the current quarter.

The Westcott scissors business continues to become stronger. In fact, Mr. Johnsen, Acme United’s Chairman and CEO, mentioned that a large retailer tried a different scissors supplier a few months ago, and now has returned to Acme because sales of the other brand were disappointing. A true validation of the Westcott scissors brand.

Also the new iPoint non-stick pencil sharpener should do well. Coloring books for adults have become popular, and we expect pencil sharpener sales to benefit from this trend. The product is traditionally also a big hit during Acme’s second and third quarter, the back-to-school season.

The Cuda line of fishing tools continues to gain market share in the US, Canada and Europe. Also the Clauss and Camillus brands are poised to achieve record sales in 2016, as they’ve gained new business at mass market retailers and sporting good chains.

Also the first aid business has laid the groundwork in the first quarter for a strong 2016. The First Aid Only brand recently received an order for 40,000 SmartCompliance kits from a major retailer in the United States. And a significant order for hurricane preparedness first aid kits is being shipped to another large customer.

Moreover, at Diamond Machining Technology (DMT), a leader in sharpening tools for knives, scissors, chisels, and other cutting tools, new accounts worth around $1 million have already been added since the sharpening products manufacturer was acquired two and a half months ago.

Based on our outlook and calculations, we reiterate our buy recommendation for Acme United Corp. with a price target of $28.12, which is 61% above today’s stock price.

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